Time for your portfolio to get new glasses

Commentary: The North is stagnant, the South is rising

ThomasKostigen

SANTA MONICA, Calif. (MarketWatch) — It’s time to put on a new pair of eyeglasses.

The world doesn’t look the same. What was once the dominant developed world called the Global North is no more. The Global South, or developing world, has risen.

This means massive investment portfolio overhauls need to be undertaken. Re-allocations on a never-before-seen scale should be underway.

Global North investments cannot be categorized as safe, secure capital any longer. Risk adjustments must be made. And that translates into active portfolio management for both individuals and institutions.

Reuters

Singapore and other Southeast Asian economies are weathering the financial storm.

The fastest growing economies are in China, Southeast Asia, South America, and the Middle East. Meanwhile, the U.S. is facing a “fiscal cliff”; Europe is in shambles with Greece, Spain, and Ireland among other tenuous economies drowning; and Japan is a place to “invest in underperforming companies with no outside directors,” as The Economist magazine put it last week. These markets were once what comprised the developed world. No more.

To be sure it isn’t just finances that are turning the tide. The emerging markets are where environmental, social, and corporate governance thinking and methodologies are being woven into financial behavior, setting companies small and large as well as entire economies on more solid paths of holistic prosperity.

Indeed, in a recent World Bank report on knowledge sharing, Sri Mulyani Indrawati, World Bank managing director, said, “Up until recently, development cooperation was about transferring money, technology and solutions from developed countries to developing countries. Today, development solutions come from anywhere — North, South, East and West — and increasingly from other developing countries. They come from countries and regions that have confronted the same issues and solved them. Many of them have achieved economic growth and social progress. There is a desire to share their development experience and now some of these countries are organizing themselves as knowledge hubs.”

With China's new leaders comes shift of power

(3:10)

As China waits for the next generation of leaders to emerge from the 18th Communist Party Congress, WSJ contributing columnist Russell Leigh Moses talks about the most significant change in this year's leadership transition.

In other words, as the Global North continues to dig itself out of the hole caused by financial irresponsibility, environmental ignorance, and debate over whether companies should be merely profit-making machines or good corporate citizens with social consciences as well, the Global South is learning from these mistakes; it’s poised for success.

Let’s face it, investments that create double-barrel returns in terms of financial rates and social impact are largely found in the Global South. That’s the future.

Moreover, it doesn’t take a financial genius to see that population growth is occurring most in developing countries, natural resources are mostly found in these areas, and in turn trade and business development are on the rise. These mega-trends will manifest into new revenues and profits. For investors, the business landscape doesn’t get any clearer.

The axis has shifted, and so too should the asset-allocation models of many, if not most investment portfolios. So put on those new eyeglasses and look at 2013 with a different vision, one that minds environmental, social and governance issues along with potential investment returns.

Then put the Global South at the top of the list of places to start looking for investments.

Thomas M. Kostigen is a bestselling author whose latest book Golden Dawn is available in bookstores and online.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.